Competition Issuesin Philippine Telecommunications Sector Challenges and Recommendations Mary Grace Mirandilla-Santos 1st National Competition Conference December 9, 2014, PICC PH Telecom and ICT ICT Statistics per 100 inhabitants (ITU, 2013) Mobile-cellular subscriptions 104.5 Fixed (wired)-broadband subscriptions 2.6 Mobile-broadband subscriptions20.3 Individuals using the Internet (%)37 0.010.020.030.040.050.060.0 Philippines Viet Nam Indonesia Thailand Broadband subscriptions per 100 inhabitants Fixed Mobile PH Fixed and Mobile Telecom (1992-2013) 0.0 20.0 40.0 60.0 80.0 100.0 120.0 199219931995199619971998199920002001200220032004200520062007200820092010201120122013 Subscribed Fixed Line Teledensity (per 100 people, ITU)Subscribed Mobile Teledensity (per 100 people, ITU) Interconnection crisis brewing EO 59 EO 109 RA 7925 GSM tech introduced; SMSoffered Prepaid introduced PLDT/Smart & Globe sign interconnection agreement Estrada calls PLDT & Globe to a meeting Sun Cellular enters, offers Unlimited Call/Text Sun subscribers skyrocket to 1M Smart & Globe start to offer "bucket" plans PLDT buys Smart Globe completes share-swap w/ Islacom NTT (Japan) raises stake in Smart/PLDT Smart absorbs Piltel Globe merges w/ Clavecilla; partners w/ Singtel New mobile players enter; Congress grants franchises PLDT buys Digitel (Sun Cellular) More players = better service, lower price, innovation Mergers and acquisitions not harmful as long as theres real competition Internet Access Value ChainInternational connectivity : Connecting users to the wider internet (submarine cables) National backbone : Delivers to national aggregation points (IXPs), and to submarine cable landing stations (optical fiber or microwave) Middle mile: Infra that carries traffic from telephone exchanges or mobile base stations to central switching locations Last mile : Final link from the network to the user Source: (2013) PH Internet is a different story No real competition in the market Only two major players control infra, therefore pricing Smaller players being bought; 100+ ISPs in 1997, >10 in 2014 High barriers to entry Congressional franchise + license (CPCN) Negotiating LGUs territorial connectivity Telecom is a vertical, monolithic whole Lack of interconnection among ISPs Local traffic between two ISPs gets sent abroad to be exchanged and then routed back! Each data hop costs time and money. PH Internet is a different story Inadequate infrastructure vs. demand Extremely limited copper distribution (landlines) Wireless/mobile technology is only way to expand, but: Towers expansion is expensive Base station requires users to be within 0.5km - 2km radius Rolling out fiber is expensive; each telco has to: (i) dig up their own utility corridor and (ii) deal with LGUs DepEd: Of 38,569 elementary schools, 83% has no Internet access in their area, wired or wireless. Outdated laws and interconnection rules Weak regulator, with poor record in consumer protection No anti-trust law to check on big business Very expensive! Wholesale: Business-grade bandwidth (1 Gbps) Retail: 2nd most expensive out of 62 countries Manila$25 to $45 per Mbps Cebu$70 Australia/NZ$6 Hong Kong$5 USA35 cents to $2 Source: Rhett Jones, 2014 Philippines$20.35 per Mbps Indonesia$16.83 Malaysia$10.29 Singapore$2.56 Thailand$2.29 Viet Nam$2.25 Source: Ookla, Dec 2014 Poor Quality = Low Value for Money Philippine ISPs vs. Select South Asian & Southeast Asian ISPs 0 50 100 150 200 250 300 0800 H1100 H1500 H1800 H2000 H2300 H Airtel 3G (4Mbps)-Bangalore,IN Tata (3.1Mbps)-Chennai,LK Airtel (4Mbps)-Delhi,IN Airtel LTE (4Mbps)-Bangalore,IN Ooredoo Data 99 (7Mbps)-Male,MV Dhiraagu Data 200(1Mbps)-Male,MV Ncell (7.2Mbps)-Kathmandu,NP PTCL Evo (9.3Mbps)-Karachi,PK Etisalat (7.2Mbps)-Colombo,LK Telkomsel Flash Ultima(3.6Mbps)-Jakarta,ID SMART Bro Starter Plug-it (7.2 Mbps)-Manila,PH* Globe Tattoo Tattoo Stick (3.6 Mbps)-Manila,PH* Sun Broadband Plan 799 (3.6Mbps)-Manila,PH kbps per USD Source: LIRNEasia, 2014 Way Forward to Better Internet (1) Amend RA 7925: Structural separation Separate, individual segments can be provided by non-franchise holders because they dont serve public directly (e.g., landing stations, towers, and fiber optic cables) More providers of carrier-neutral, non-discriminatory services Pass the Fair Competition/Anti-trust Law Public interest is better served when there is real competition Framework for government to intervene appropriately Push for legislation that promote innovation Magna Carta for Philippine Internet Freedom (MCPIF) Convergence Law Department of ICT? Way Forward to Better Internet (2) Local IP peering: Keep local data within national border In 2011, 15-23% of internet traffic was domestic Promote efficient use of international bandwidth Ensure security of local data, especially of government A.O. 39 (2013) requires government offices to ensure their ISPs are peered through the Philippine Open Internet Exchange (PHOpenIX) Shared infrastructure for telcos and ISPs Tower co-location: Telcos can save up to 75% of capex and 60% of opex New business and incentives for 3rd party, especially for LGUs Shared utility corridor: Neutral 3rd party to set up conduits in civil works, railways, transmission lines where all utilities can connect Way Forward to Better Internet (3) But under present laws, NTC can: 1. Regulate ISPs for quality of service Consumer welfare protection mandate under RA 7925 2. Broadband QoS testing and infrastructure audit Monitor service performance standards for internet services under existing (and updated) NTC rules 3. Determine penalties for violation of industry No need to amend CA 146 Public Service Act NTC has the mandate to ensure competition and protect consumers. THANK YOU. Mary Grace Mirandilla-Santos Independent telecom and ICT policy researcher Research Fellow, LIRNEasia gmirandilla at gmail dot com